PCP Archives - My Car Credit

Financing a Second-Hand Car: 4 Options

Friends going on a trip in a red car bought using car finance

It’s never been easier to find car finance for nearly new or used cars. Choosing to purchase a ‘new to you’ vehicle has many advantages. You’ll be able to split the cost of your vehicle into a series of affordable monthly instalments, potentially affording a better set of wheels than you would otherwise be able to. Plus, you’ll be improving your overall credit score.

But what options are there for financing a second-hand car? We break down how My Car Credit can help you to get behind the steering wheel of a nearly new or used vehicle below.

How to finance a used car

Used car finance is a catch-all term for car finance agreements that allow you to borrow money against a used or nearly new vehicle.

Remember to always do your research before purchasing a new or nearly new vehicle. You want to make sure that you’re in the know about everything from the vehicle’s condition through to its remaining warranty (if relevant), and its service history.

There are different kinds of car finance agreements that you can choose for your used car. The right deal for you will depend on your unique needs and circumstances.

It’s worth comparing the different kinds of used car finance available, so that you can make an informed decision and choose the right agreement for you. That way, you’re not forking out for anything you don’t need.

Financing a second-hand car – 4 options

Hire Purchase (HP)

HP used car finance is our most popular agreement. With HP, you can pay an initial deposit, followed by a series of monthly instalments. This initial deposit isn’t always necessary, but paying it means you’ll have lower monthly payments.

Your monthly outgoings are fixed, giving you greater budgetary control. You won’t face a final balloon payment, and will own the vehicle at the agreement’s end. Plus, you also won’t face mileage limits, or fines for excessive wear and tear.

HP used car finance is best for those looking to own their vehicle at the end of the agreement, and who’d benefit from no usage limitations. You will be expected to make higher monthly payments compared to other finance agreements.

Personal Contract Purchase (PCP)

With PCP, you’ll pay a deposit and regular monthly payments against your used or nearly new vehicle. These monthly payments are lower compared to other agreements (like HP) because you’ll pay a final lump sum (balloon payment) at the end of the agreement. This allows you to completely own the car. Alternatively, you don’t have to make the balloon payment and can hand the car back providing the car is in good condition and within the contracted annual mileage.

Personal Contract Hire (PCH)

PCH car finance can also be referred to as a lease agreement. Essentially, you’re renting the vehicle for a long-term period of time, before handing it back to the dealership. You’ll pay an initial deposit and can also benefit from features like breakdown and road tax coverage.

PCH used car finance is only suitable for those with good or excellent credit scores, who aren’t looking to own the car at the end of the agreement. You’ll also face charges if you exceed mileage limits or cause excessive damage.

Personal Loan

With a personal loan, you’ll borrow the full amount of the used or nearly new vehicle, paying this off via monthly repayments. Essentially, you’re buying the car outright, and you own it from the beginning of the agreement. This means that you can always choose to sell it any time after purchasing it.

A personal loan is the simplest financing option for a second-hand car, but is only suitable for those with a good credit score.

Is financing a second-hand car right for me?

There are many benefits to financing a second-hand car. You’re spreading the cost of what can be a very expensive purchase, potentially affording a nearly new vehicle that would be beyond your budget if you were buying outright. Plus, by making your monthly repayments according to schedule, you’ll improve your overall credit rating.

As with any finance agreement, if you fail to make your repayments, you’re at risk of losing the vehicle and negatively impacting your credit score.

Find out more about financing a second-hand car

Check out our post to find out more about your used car finance options. We also have a car finance calculator to help you do the maths on your next vehicle purchase.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

What Happens if I Can’t Pay My Balloon Payment?

Woman stood by her car refinancing her balloon payment on a mobile phone

Buying a new car is exciting. Whether you’re looking for a family-friendly drive, or a two-seater sports car, finding a new set of wheels can be fun.

However, a car is also likely to be expensive. In fact, after a house, a car is probably the second highest expense you’ll ever face. Car finance gives you the option of breaking down that expense into manageable chunks.

There are plenty of different types of car finance agreements available. With our wide range of lenders, you are sure to find one that accommodates your needs and circumstances – even if you have a poor credit score.

This article will break down what a balloon payment is, as well as what happens and your possible options if you can’t afford to pay it.

What is a balloon payment?

In order to understand what happens if you can’t pay a balloon payment, it’s worth outlining what these are. You can also check out our guide to how balloon payments work for more detail.

In car finance terms, a balloon payment is a one-off lump sum plus an option to purchase and possible admin fees, that you owe at the end of your agreement if you wish to own the car.

Not all car finance agreements have a balloon payment. For both Personal Contract Purchase (PCP) and lease agreements, you’ll face a balloon payment at the agreement’s end. Because you’re making this final balloon payment, you’ll benefit from lower monthly repayments during the term of your agreement. By making this payment at the end of a PCP agreement, you’ll own the car outright. On the other hand, it simply makes monthly payments lower for a lease agreement with no option to own the car.

A balloon payment is optional with PCP, but not optional with a lease agreement. If you don’t want to own the car at the end of your PCP agreement, you can hand it back or choose another finance agreement with the same lender as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

What happens if you can’t pay your balloon payment?

There are a number of eventualities if you can’t afford your balloon payment.

Late fees or penalties

In some instances, you may face late fees or penalties by the lender. These are additional charges on top of what you owe for the balloon payment.

Default and repossession

If you don’t confirm to your lender what end-of-deal option you want, they may automatically try to take the payment. If you don’t have the available money, you may therefore end up defaulting on the finance agreement.

There are any number of steps that a lender can take if you default on a loan. Your account may be sent to a debt collection agency to try and recover outstanding payments. This will have consequences for your credit score and future loan viability.

Alternatively, the lender may try to initiate repossession of your vehicle. This essentially means they reclaim the vehicle as collateral for the debt. This also has consequences for your credit score.

Legal action

In more extreme instances, you may face legal action, which could lead to a court judgment against you. Depending on the court order, the lender may be allowed to seize collateral to make up for the debt. Alternatively, you may be subject to wage garnishment, where an employer is required to deduct money from your salary until your debt is paid off.

Impact on credit score

In any of the above instances, your credit score will suffer. Defaulting on your car finance agreement and experiencing repossession will negatively impact your credit rating. A lower score then reduces your future loan viability, making it harder to obtain agreements. You’ll also likely face higher interest rates and less appealing terms for any future loans.

What to do if you can’t afford your balloon payment

If you can’t afford your balloon payment, you have some options.

Refinance your balloon payment

My Car Credit offers balloon payment finance. This works like any other finance agreement. You’ll break down the lump sum of the balloon into manageable monthly repayments.

We can help individuals with all credit profiles, using our large panel of lenders to find an agreement that’s right for you.

Negotiate with the lender

If you think you can’t afford your balloon payment, contact your lender sooner rather than later. You may be able to renegotiate the terms of the loan, benefiting from an extension or refinancing the balloon payment.

Hand back the vehicle

With PCP car finance, you don’t have to make the final balloon payment. You can hand the vehicle back at the end of the agreement as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

However, this isn’t suitable for those who need their car on a daily basis. Plus, you’ll have to shop around for a new finance deal for your next set of wheels. By making the balloon payment, you’ll own the car outright, and can use it as you please.

Sell or trade the vehicle in

Depending on your circumstances and the agreement, you may be able to either trade in or sell your vehicle if you can’t afford the balloon.

Remember that you’ll only be able to do so if its market value is enough to cover the outstanding balance on your loan.

Discuss balloon payment refinancing with My Car Credit

You have options if you can’t pay your balloon payment.

At My Car Credit, we work with individuals with all credit profiles to help them find the right balloon payment refinancing. Use our online calculator to get an instant, no-obligation quote for your expected monthly payments, rate of interest, and total payable amount. Please note that should you progress, some lenders may perform a hard search on your credit file.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

Car Finance for First Time Buyers: A Beginner’s Guide

What is CS Car Finance?

How Do Balloon Payments Work?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

balloon payment finance car finance car finance options hire purchase Jan24 lenders PCP pcp balloon payment used car

Balloon Payments Explained: What, Why & How

Black Tesla driving down the road bought with a Balloon Payment

Car finance has lots of confusing jargon – and a balloon payment is one example. Consider this article your ultimate guide to the what, why and how of balloon payments.

What is a balloon payment?

There are many different kinds of car finance available, depending on your needs.

Certain agreements allow you to make a final lump sum (the balloon payment) at their end. Once you’ve paid this one-time lump sum, along with an option to buy purchase and possible admin fees, the car belongs to you.

How does a balloon payment work?

A balloon payment works as a one-off lump sum you can pay at the end of your car finance agreement if you want to own your car.

With PCP, the one-off balloon payment is optional. You don’t have to pay it if you want to hand the car back or opt for a new finance agreement on another car.

The balloon payment is calculated based on the expected depreciation of your car (also known as the Guaranteed Minimum Future Value). It’s a fixed cost, meaning that no matter how much the value of your car fluctuates, it won’t rise.

Why choose car finance with a balloon payment?

There’s more than one type of car finance that allows you to own the car outright at the end of your agreement. With HP (hire purchase), you can own the car without making a final balloon payment (although there’s usually some admin fees to pay).

With that in mind, why would you want to choose car finance with a balloon payment?

HP finance has many benefits. However, because you’re not paying a final balloon fee, you’ll make higher monthly repayments compared to a PCP agreement.

A car finance option with a balloon payment is, therefore, a better choice for you if you want lower monthly repayments and if you regularly update your wheels.

What happens if I can’t afford my balloon payment?

If you’re keen to own your car outright at the termination of your finance agreement but can’t afford the balloon payment, don’t panic.

At My Car Credit, we understand that not all drivers have the cash for their balloon payment. That’s why we have balloon payment finance. With this agreement, you’ll break down your final balloon payment into manageable monthly instalments.

Apply with balloon payment finance with My Car Credit

No matter your circumstances, you can check if you are eligible for car finance with our handy online calculator. Our initial credit check is only a soft search, too – meaning it won’t impact your credit profile! Please note however that should you progress, some lenders may perform a hard search on your credit file.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

Can You Modify a Car on HP Finance?

Car Finance vs Personal Loan, what’s best for me?

What is a Guarantor Loan?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

balloon payment finance car finance car finance options hire purchase Jan24 lenders PCP pcp balloon payment used car

How Do Balloon Payments Work?

Red and black cars bought using a Balloon payment

One of the many benefits of car finance is its flexibility. The range of car finance agreements means you’re guaranteed to find one that works for your unique needs and circumstances.

With that said, this range of options may make your decision feel overwhelming – and that’s not to mention the jargon involved in any choice!

This article will break down what a balloon payment is, how they work, and whether they’re right for you. By demystifying one of the more confusing terms associated with car finance, we’ll help you to decide whether car finance with a balloon payment is right for you.

What is a balloon payment?

In car finance terms, a balloon payment is a one-off lump sum that you pay to your lender at the end of certain finance agreements.

Both Personal Contract Purchase (PCP) and lease agreements have a final balloon payment that you can make at the agreement’s end. Making this payment means that you’ll own the car outright.

How do balloon payments work?

With both PCP and lease agreements, you’ll face a balloon payment at the agreement’s end (plus an option to purchase fee and possible admin fees).

Be aware that with PCP, a balloon payment is optional – you don’t have to pay it. You can choose to hand the car back to the lender or opt for a new finance agreement on another car. With a lease agreement, a balloon payment is not optional.

The amount you’ll pay for your balloon payment is calculated according to your lender’s estimation of your car’s depreciation. This is known by many names – the ‘Guaranteed Future Value’ (GFV), ‘Guaranteed Minimum Future Value’ (GMFV) and ‘Residual Value’ (RV). We’ll call it by the GMFV here.

The GMFV predicts the value of your car at the end of your finance agreement. Your lender will estimate this based on factors including the vehicle make and model, yearly mileage estimates, and the length of your agreement.

The GMFV (the balloon payment) is a fixed cost that’s written into your car finance contract. It can’t fluctuate based on your car’s actual value.

As such, even if your car is worth less at the end of your agreement than the GMFV estimation through no fault of your own, you don’t have to pay to make up the difference. Alternatively, if your car is worth more, you can find yourself in positive equity. This allows you to either make the final payment and sell the vehicle on for a profit – or put that equity towards another car finance agreement with the same lender.

What are the benefits of car finance with a balloon payment?

Don’t forget to check out our guide to the eight advantages and disadvantages of a balloon payment for a more comprehensive breakdown of their pros and cons.

Lower monthly payments

Compared to car finance agreements like Hire Purchase (HP), car finance with a final balloon payment has lower monthly payments.

You get to own your vehicle

If you love your vehicle and want to keep it, you can! Otherwise, you have two options available to you. You could part-exchange the vehicle for a newer, more modern vehicle, or simply hand the keys back, as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

What are the drawbacks of car finance with a balloon payment?

Usage restrictions

Car finance agreements like PCP do have vehicular usage restrictions. These may include a yearly mileage limit, and you’ll pay extra if you incur excessive damage.

These restrictions are established because of your lender’s prediction of your car’s GMFV. If you breach these restrictions, you can impact this estimation, and will be penalised.

Payment shock

A car finance agreement with a balloon payment means you’ll pay lower monthly instalments. However, this can mean that the balloon payment is expensive, and you may find yourself experiencing payment shock.

If you do find yourself in this position, you can benefit from balloon payment finance.

Not ideal for those with lower credit ratings

At My Car Credit, we understand that not all drivers have exceptional credit scores, and thanks to our wide range of lenders, we can accommodate all kinds of credit profiles.

If your credit score is less than ideal, you’re less likely to qualify for car finance with a balloon payment. Therefore an agreement without a balloon may be more suitable.

What happens if you can’t afford your balloon payment?

There can be any number of reasons why you may find yourself unable to pay your finance agreement’s final balloon payment.

My Car Credit understands that not all drivers may have the cash upfront to be able to make your balloon payment. Balloon payment finance provides one solution, working just like a car finance agreement. By breaking down the balloon payment’s lump sum into manageable monthly repayments, you have better budgetary control.

Use our online calculator to receive an instant no-obligation decision on balloon payment finance. Our initial credit check won’t impact your score, and we’ll leverage our large panel of lenders to find a deal that’s best for you. Please note that should you progress, some lenders may perform a hard search on your credit file.

Is a balloon payment right for me?

Car finance agreements with a balloon payment have various advantages. From lower monthly repayments to a guarantee of your vehicle’s future value, having an agreement with a balloon payment can be beneficial. Plus, with PCP finance, you don’t have to make the final lump sum – you can enter another finance agreement on a different car with the same lender. This is great for people who like to regularly update their wheels.

With that said, if you’ll struggle with usage limits or are prone to damaging your car, you may need to consider your options. Plus, you’ll have to evaluate your financial situation. Plan ahead to ensure that you can make the final balloon payment or consider balloon payment finance to avoid facing payment shock.

Wondering if you are eligible for My Car Credit car finance?

Do the maths on your next car with our handy online calculator and discover how My Car Credit can help you find the right car finance.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

What is a Guarantor Loan?

What is the Oldest Car a Bank Will Finance?

Can You Pay Monthly for a Used Car?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

balloon payment finance car finance car finance options hire purchase Jan24 lenders PCP pcp balloon payment used car

8 Advantages and Disadvantages of a Balloon Payment

Shiny car bought using a balloon payment

How do you know if a car finance agreement with a balloon payment is right for you? The first step is to understand the advantages and disadvantages of a balloon payment. Read on as we look at 4 advantages and 4 potential disadvantages.

What is a balloon payment?

A balloon payment is the one-off lump sum, plus an option to purchase and possible admin fees, that you can pay at the end of certain car finance agreements like PCP. By making this payment, you’ll own the car outright.

Balloon payments aren’t obligatory with PCP – at the end of your finance agreement, you can always hand the car back, or choose another finance agreement on a different car.

Any balloon payment is calculated on the expected depreciation of your car (also known as the Guaranteed Minimum Future Value or Residual Value).

The GMFV or RV predicts what the car will be worth at the end of an agreement, based on your usage estimates. The factors that will impact its value include the make and model of the car, your yearly mileage estimates, and the length of your finance agreement.

The GMFV or RV is a fixed cost – it won’t fluctuate based on your car’s value.

Advantages of a balloon payment

Lower monthly repayments

Other car finance agreements like Hire Purchase (HP) give you the option of owning the vehicle at the agreement’s end.

However, with HP, you don’t pay a final balloon payment. As such, you’ll face higher monthly repayments than you would with a car finance agreement that has a final balloon payment.

Fixed cost

A balloon payment is calculated based on your lender’s estimation of depreciation in your car’s value – the Guaranteed Minimum Future Value or Residual Value. This is a fixed cost – it won’t fluctuate throughout your car finance agreement, even if your car’s value changes.

Sometimes, finance companies may get your car’s value (its GMFV or RV) wrong. It can depreciate in value more than expected, meaning you’re in negative equity.

However, the balloon payment is a fixed cost. As such, if you find yourself in negative equity through no fault of your own (not breaching usage restrictions), you still won’t face any additional fees.

Potential for positive equity

Your car’s value may depreciate less than was predicted.

If your lender undervalues your car’s GMFV or RV, you could, therefore, find yourself in positive equity. This means that you find yourself at the end of an agreement with a vehicle that’s worth more than your finance company estimated.

You can then choose to make the final balloon payment and sell the car on for a profit. Alternatively, if you stay with the same finance company, you can put this positive equity towards the deposit on a new vehicle.

You get to own your vehicle!

If you love your car and want to keep it, you can! Otherwise you have two further options available to you. You could part-exchange the vehicle for a newer or different model or simply hand the keys back, as long as the vehicle is in good condition, in line with the contract terms and within the agreed mileage.

Disadvantages of a balloon payment

Usage restrictions

Car finance with a final balloon payment typically requires usage restrictions. You may be expected to keep under a certain mileage, and you are expected to return the car in good condition at the agreement’s end.

If you go over these usage restrictions, you’ll be penalised. This is because your lender will base your car’s depreciation value on these usage restrictions. Breaching them will impact the accuracy of this value, which can have financial ramifications.

Not ideal for those with lower credit scores

If your credit score is less than ideal, you’re unlikely to qualify for car finance agreements with a balloon payment.

Therefore an agreement without a balloon may be more suitable if your credit rating is low.

Not optional for lease agreements

With PCP, the balloon payment is optional. However, this payment isn’t optional with a lease purchase agreement – you’ll have to pay the final lump sum.

Expensive final payment

The balloon payment can be a hefty sum. You may not have access to the cash needed to make this payment.

However, you can choose to refinance your balloon payment in this instance.

How do I refinance my balloon payment?

With balloon payment finance, you’re refinancing your balloon payment. This allows you to break down the lump sum into affordable monthly payments. You’ll also have an extended loan time, and you may be able to access better interest rates.

Wondering if you are eligible for My Car Credit car finance? Do the maths on your next car with our handy online calculator.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

Financing a Second-Hand Car: 4 Options

How Much Car Finance Do I Qualify For?

Is there such a thing as guaranteed car finance?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

balloon payment finance car finance car finance options hire purchase Jan24 lenders PCP pcp balloon payment used car

What is the Oldest Car a Bank Will Finance?

Love the charm and character of older cars but unsure about whether they’re eligible for finance? In this hands-on guide we’ll answer “what is the oldest car a bank will finance”. Our goal – to help you get behind the wheel of a car with its own unique story to tell.

The golden numbers

While there’s no hard and fast rule about what the oldest car a bank will finance is, 10 years is generally considered the maximum age for standard agreements. Most high street banks require cars to be no more than 10 years old, with no more than 100,000 miles on the odometer.

Exceptions to the rule

While 10 years and 100,000 miles are considered the maximums for bank-funded auto finance, there are some exceptions to the rule. For example, classic cars are often eligible for finance agreements. What’s the difference between ‘classic’ and ‘older’ cars? There are similarities between the two, however most banks see them as very different candidates for auto finance.

Defining a ‘classic’ car

According to HMRC, classic cars must be at least 15 years old and have a minimum value of £15,000. This is ultimately what sets classics apart from older vehicles. Unless the car meets these prerequisites, banks will generally be reluctant to approve auto finance.

Prefer the gleam of a newly polished hood ornament over the glow of a next-gen touchscreen dashboard? You’re not alone. The UK is a nation of classic car enthusiasts, with the latest stats from the Federation of British Historic Vehicle Clubs (FBHVC) revealing there are more than 1.5 million classics currently registered in the UK.

Dreaming of securing the keys to a pristine pre-war Bentley or a British-built Lotus Elise? Read on to find out more about what the oldest car a bank will finance is and how auto loans work for classic vehicles.

Understanding classic car finance

Unlike traditional auto loans, classic car finance operates within a niche market. Agreements are often tailored to meet the unique needs of vintage automobile enthusiasts, which means financing a classic car can be a little different from the usual process.

Factors influencing classic car finance

Several factors come into play when determining the oldest car a bank will finance. These can include:

Age of the vehicle

One of the first variables banks assess is the age of the classic car. What is the oldest car a bank will finance? While there’s no set rule on the maximum age of a vehicle eligible for financing, most banks tend to favour classics from the post-war era onwards. That said, some specialty lenders may extend financing for exceptionally rare or historically significant vehicles, regardless of age.

Condition

The condition of the classic car plays an important role in securing financing. Banks are more likely to finance well-maintained or meticulously restored classics with documents to back up their past.

Rarity

Rarity, historical significance and desirability among collectors can increase the likelihood of securing finance for older vehicles.

Appraisal and valuation

Before extending financing for a classic car, banks often request a comprehensive appraisal and valuation of the vehicle. This helps determine the market value, authenticity and overall condition of the classic car. Why does this matter? It helps provide banks with confidence in the value of the asset they’re financing and potential resale value.

Types of classic car financing

Classic car financing options vary depending between lenders, so it’s important to do your research and find the right fit. Banks generally take a more conservative approach to finance and stick with popular options like Hire Purchase and Personal Contract Purchase.

Hire Purchase (HP)

This option sees you make a deposit upfront, followed by fixed monthly payments. These payments cover the full purchase price of the classic car, plus interest. Once the final payment is made, legal ownership of the vehicle is transferred to the borrower.

Personal Contract Purchase (PCP)

PCP offers lower monthly payments than HP, as you effectively lease the classic car for a set period of time. At the end of the agreement, you have the option to return the vehicle, trade it in for a different model, or make a balloon payment along with and option to purchase and possible admin fees, to take ownership.

Personal Loans

Personal loans can be a good way to finance a classic car purchase and provide lump-sum financing for the total cost of the vehicle. In exchange, you’ll commit to fixed interest rates and repayment terms.

Navigating your classic car finance journey

From sleek Jaguar E-Types to James Bond-worthy Aston Martins, classic cars are genuine head turners. However, complications can arise when attempting to secure finance. Here are some expert tips on how to improve your chances of success.

Research and due diligence

Before approaching a bank for classic car financing, take the time to thoroughly research the make, model and historical significance of the vehicle. Gather as much documentation as possible, including appraisal reports, maintenance records and ownership history. The more documents you have to support your finance application, the better!

Consider specialty lenders

Feeling disheartened after your application for auto finance has been knocked back? Remember, the buck doesn’t necessarily stop with high street banks. Consider working with a broker like My Car Credit to unlock access to specialty lenders with experience financing classics. Unlike banks which often adopt a conservative and inflexible approach, brokers work with a wide range of lenders, including lenders willing to finance vintage automobiles.

Insurance requirements

Your classic car financing agreement may come with specific insurance requirements to protect the value of the asset and minimise risk for the lender. For this reason, many lenders will insist you have comprehensive classic car insurance in place before finalising the agreement.

The bottom line on financing old cars

Ultimately, there’s no definitive answer to “what is the oldest car a bank will finance?” That said, there are some benchmarks to keep in mind. Banks will generally knock back applications for auto finance if the car is more than 10 years old, with more than 100,000 miles on the odometer. Unless the car qualifies as a ‘classic’, which means it must be at least 15 years old and have a minimum value of £15,000.

Secure the keys to a classic with My Car Credit

Got your heart set on a classic car? Whether you’re dreaming of a mid-century Chevrolet or a Mini in mint condition, My Car Credit is here to help you enjoy the thrill of vintage motoring. We work with a large panel of lenders to maximise your chances of success, with classic car finance options including high street banks as well as non-traditional lenders.

Try our handy online finance calculator to find out more about your options.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

How Does Car Finance Work in the UK?

How Much Car Finance Do I Qualify For?

Who is the Legal Owner of a Car on Finance?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance car finance options classic car hire purchase hp Jan24 lenders PCP used car

PCP vs HP – What’s the Difference Between Them?

When it comes to car finance, a standardised approach doesn’t always work. Every motorist is different, which is why lenders offer a variety of models, including personal contract purchase (PCP) and hire purchase (HP). Both are hugely popular in the UK and used to finance everything from budget-friendly hatchbacks to luxury EVs.

Each option offers unique benefits, so how do you decide which is right for you? In this comprehensive guide, we’ll cover everything you need to know about PCP vs HP, including how they work and the key differences between the two financing options.

Understanding the difference between HP and PCP

Let’s start with a breakdown of each financing option:

Personal contract purchase (PCP)

In a PCP agreement, the goal isn’t to own the car outright. Instead, you effectively rent it for a set period, typically two to four years. Your monthly payments cover the car’s depreciation over this period, as well as interest.

At the end of a PCP agreement, you have three choices:

Return the car
Trade in the car for a new model
Make a balloon payment to buy the car outright. Balloon payments are lump sums agreed on at the start of your contract and calculated using the guaranteed minimum future value (GMFV) of the car.

Hire purchase (HP)

Hire purchase is a more straightforward financing model and puts you on a direct path to ownership. The total cost of the car, minus any deposit paid upfront, is spread over fixed monthly payments. Once you make the final payment, the car is yours to keep. There’s no need for a balloon payment at the end of the contract and you don’t have the option to return the vehicle. If ownership is your end goal, HP is a great option.

PCP vs HP: how the two compare

Now you know more about how each auto finance model works, let’s take a look at how they shape up against each other.

Ownership

PCP offers flexibility but stops short of ownership unless you’re willing to make a balloon payment. As mentioned earlier, you can choose to return the car at the end of the agreement. This makes PCP an attractive option for motorists who love to upgrade to a new model every few years.

The option to own is an important difference between HP and PCP. Once the final payment is made on a HP agreement you become the legal owner of the vehicle. This makes HP ideal for motorists with long-term ownership goals.

Monthly payments

Affordable monthly payments are one of the top benefits of PCP. They’re generally lower than HP payments as you’re covering the car’s depreciation, not its full value.

Monthly payments are higher for HP agreements as you’re paying off the entire cost of the car, plus interest.

Balloon payment

The need for a balloon payment at the end of a PCP agreement can catch some motorists off guard.

In comparison, monthly payments made on HP agreements are designed to cover the full cost of the car which means you won’t be hit with a lump sum at the end of your contract.

Mileage limits

PCP agreements often come with mileage restrictions, with additional charges incurred for exceeding your cap. This can make PCP limiting for high-mileage motorists.

With HP, you’re free to drive as much as you like without worrying about mileage restrictions or penalties. For many motorists, this freedom makes the PCP vs HP decision easy.

Customisation options

Since you’re essentially leasing the car in a PCP agreement, there may be restrictions on customisations.

HP gives you the freedom to modify your vehicle. Whether it’s a custom paint job, tinted windows, tech upgrades or seating configuration, this is a big difference between HP and PCP.

The bottom line on PCP vs HP

Ultimately, there’s no hard and fast answer when it comes to the PCP vs HP debate. What’s best for you depends on your individual preferences, financial situation and driving habits. PCP offers flexibility, affordability and options at the end of your contract, while HP prioritises ownership. Be sure to factor in your long-term plans when deciding and consider how each option aligns with your personal goals.

Need a hand deciding which is option is right for you? At My Car Credit, we pride ourselves on offering friendly, personalised support to British motorists. This includes helping you understand the difference between HP and PCP. As well as PCP and HP, our team can get you up to speed on other popular car finance options, including conditional sale and personal contract hire (PCH).

Get in touch with a team member on 01246 458 810 to find out more or email us at enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

How Many Years in a Car Loan Term?

Why Does Car Financing Take So Long?

Electric Car: Lease vs Buy – Which is Best?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car finance credit score hire purchase Jan24 lenders PCP poor credit

Leasing vs Finance: What’s the Difference and Which is Better?

Red sports car bought on finance driving down the road

Despite rising interest rates, borrowing remains the most popular way for Brits to secure the keys to a new car. Of the different borrowing options available, leasing and finance are two of the most utilised. While both avenues offer a route to your dream set of wheels, they come with unique pros and cons.

Wondering which is better for you? In this guide, we’ll break down both and learn more about lease vs finance car options. We’ll spotlight the differences between the two and offer expert tips designed to help you make an informed decision.

Leasing: an alternative to vehicle purchase

Often called Personal Contract Hire (PCH), car leasing is like a long-term rental arrangement. When leasing a car, you don’t own the vehicle outright. Instead you make monthly lease payments that entitle you to drive it. At the end of the lease contract, you hand the car back to the dealer and walk away. This easy and hassle-free approach to driving helps win over many motorists considering leasing vs finance.

The benefits of leasing a car

Low upfront costs: Leasing a car typically requires a lower initial deposit compared to financing a car. This makes a lease agreement an attractive choice if you’re keen to keep your upfront expenses down.

New car feel: With car leasing, you’re consistently driving a brand-new car. It’s like always having the latest smartphone model. If you’re the kind of motorist who values next-gen technology, you’ll love this benefit of lease deals.

Worry-free maintenance: Maintenance can be a big deciding factor in the leasing and financing car debate. A lease car will often be covered by the manufacturer’s warranty for the duration of your agreement. This means you won’t incur any out-of-pocket expenses when it comes to repairs and maintenance.

Embrace change: Leasing offers the flexibility to switch to a new car every few years. If you enjoy variety, this could be your ticket to trying out different vehicles.

The downsides of car leasing

No ownership: What’s the difference between a lease car and finance when it comes to ownership? At the end of a lease deal, you don’t own the car. It’s similar to handing back the keys to a rental apartment – you enjoyed it, but it was never truly yours.

Mileage limits: Mileage is important in the leasing vs finance debate. Leases come with more stringent mileage restrictions to protect the lender from losing money on their investment. Exceeding your agreed annual mileage limit during the lease term can result in additional charges, so it’s important to keep track of your road trips. If you plan to use your car for regular long journeys, leasing may not be right for you.

Wear and tear: As well as mileage limits, you’re also restricted when it comes to wear and tear. While normal use is okay, you must return the lease car in good condition to avoid extra costs for wear and tear at the end of the lease period.

Finance: a ticket to ownership

Car finance, also known as Hire Purchase (HP) or Personal Contract Purchase (PCP), is like a mortgage for your vehicle. You make monthly payments and once the term is over and all payments are complete, you own the car outright. It’s hugely popular in the UK, with the Finance & Leasing Association estimating around 82% of new cars in Britain are funded by PCP agreements.

Here are some of the most popular types of car finance:

Personal contract purchase

A personal contract purchase (PCP) is a car finance agreement that breaks down the cost of a new car into fixed monthly payments. You’ll make a larger initial payment as a deposit, then pay affordable monthly costs including interest payments while you use the car. At the end of the leasing agreement, you’ll have the option to pay a final balloon payment, which is a lump sum to own the car outright.

Alternatively, you can change cars or end the agreement altogether. If you move onto your next car, you’ll start a new finance agreement for an agreed period.

Hire purchase

Hire purchase is the simplest of the car finance agreements as your monthly repayments cover the entire cost of buying a car plus interest payments. With hire purchase, there’s no optional balloon payment, so you will always own the car outright once all monthly repayments have been made.

The benefits of financing

Ultimate ownership: Financing a car means it’s yours at the end of the term when the final payment is made. This is the main difference of leasing and financing. You take legal ownership of the car and have full control over mileage, wear and tear and resale options. When considering lease vs finance car benefits, ownership is a big factor.

No mileage limits: Once your finance agreement is over, you can drive your new car as much as you like, without worrying about an agreed annual mileage limit or excess charges.

The investment angle: While the initial upfront cost for financing a car might be higher than car leasing, you’re building equity with every payment. It’s like gradually acquiring a valuable asset in the most affordable way.

Freedom to customise: The end goal of ownership for your next vehicle gives you the freedom to modify and personalise your car without penalisation.

The downsides of financing

Higher monthly payments: Monthly payment size is a key difference between lease and finance agreements for your next car. Instalments for financing tend to be higher than leasing, as the final goal is ownership.

Depreciation impact: As the eventual owner, you bear the full brunt of the car’s depreciation.

Maintenance costs: Unlike leasing, maintenance and repairs aren’t normally covered. Instead, you’re responsible for keeping your vehicle in tiptop shape alongside your monthly payments.

Lease vs car finance: which is better for you?

Now that we’ve dissected the differences between a lease vs finance car, it’s time to determine which option aligns with your needs and preferences. Here are some factors to consider:

Options to own the car outright

Do you want to eventually own your vehicle, or would you prefer to regularly upgrade to a brand new car? If ownership is a must, financing is your route. If you’d rather upgrade to a showroom-worthy car every few years, leasing a car could be a better option.

Monthly payments

Consider your monthly budget, capital and payment capabilities when weighing up leasing and financing. Leasing often offers lower monthly payments, which can be appealing if you’re aiming to keep costs down.

Mileage habits

How much do you drive? If you’re a frequent road-tripper, finance might be the better choice as you’re less likely to be hit with excess mileage charges at the end of your agreed period which are notoriously stringent with car leasing.

Customisation

Are you someone who enjoys customising their vehicle? Ownership via car financing gives you the freedom to make your car uniquely yours.

Long-term plans

Think about your long-term plans when considering the difference between lease and finance cars. Are you comfortable with committing to a car for several years, or do you prefer the flexibility of upgrading every few years with leasing?

Maintenance responsibilities

Consider your comfort level when it comes to handling maintenance and repairs. Car leasing often includes a warranty that covers maintenance, while financing means you’re responsible for upkeep.

Financial stability

Assess your financial stability before making a commitment to either option. Car leasing usually requires less upfront cash, making it an attractive option if you’re looking to preserve liquid assets.

The final word on leasing vs finance

Ultimately, the choice between a lease vs finance car hinges on your individual circumstances and preferences. This includes variables like budget, lifestyle and future plans. There’s no one-size-fits-all answer, and what’s best for one person might not be the ideal choice for another.

Leasing a car might be the best option if you like a new car every few years, while financing a car allows you to actually buy a car. The best way to decide is to carefully consider both options and ensure you understand the pros and cons of each. Don’t forget to factor in the different methods of financing a car, such as hire purchase or PCP with a balloon payment.

Want to know more about you’re the difference between lease and finance? Call us on 01246 458 810 to chat to an auto finance expert or email us at enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

Will I Get Accepted for Car Finance?

7 Advantages of Used Car Hire Purchase

Is there such a thing as guaranteed car finance?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car ownership finance hp Jan24 leasing pch PCP

PCP Finance Explained – Personal Contract Purchase Guide

At My Car Credit, we understand that when it comes to purchasing your dream set of wheels, budget can be a barrier. This is where Personal Contract Purchase (PCP) finance comes in. Flexible and affordable, the auto finance option is one of the most popular ways to purchase a car in the UK.

Want to know more? Read on for a complete guide to PCP finance explained, including how it works and why it could be a great solution for your next car purchase.

What is PCP finance?

PCP is a type of car finance that allows you to secure the keys to a reliable car, without the hefty upfront costs or ownership commitment of a traditional purchase.

Here’s how it works:

Get the ball rolling: The early stages of a PCP agreement usually see your financial provider perform a credit check. Ideally, they’ll use a ‘soft search’ that won’t leave a mark on your credit score. The fun part is researching cars and deciding on a vehicle. When this is done, you’ll discuss the terms of your PCP agreement with the lender. This usually includes the value of your initial deposit and how long you’d like the agreement to be.

Deposit: You put down an initial deposit to show the dealer you’re serious and lock in your preferred car.

Drive away: Once the paperwork is sorted, it’s time to drive away in your new car and enjoy the open road.

Monthly payments: After your initial deposit, you pay manageable monthly instalments. These payments typically cover the depreciation of the car over the agreed term. With PCP finance, your monthly payments are typically lower than with other options as they don’t cover the full cost of the car. This can make getting behind the wheel of a new model surprisingly affordable.

Balloon payment: At the end of the PCP agreement, you have a few choices. You can either return the car (in good condition, of course), part-exchange it for a new one, or pay a final ‘balloon payment’ to buy the car outright. If you need more clarification on how balloon payments work, simply ask your lender for more Personal Contract Purchase information.

The benefits of PCP finance explained

Wondering if PCP finance is the right route for you? Let’s break it down with a closer look at some of the key advantages:

Lower monthly payments

PCP payments are usually lower compared to a traditional car loan or Hire Purchase (HP) agreement.

Flexible choices

PCP gives you options at the end of the agreement, allowing you to decide if you want to keep the car or swap it for a new one. If you need your options at the end of your Personal Contract Purchase, don’t hesitate to ask your lender for clarification.

Newer cars

Love that new car smell? PCP agreements allow you to get behind the wheel of a car that’s fresh from the showroom.

Lower upfront costs

Smaller deposits make PCP a real drawcard for motorists without much capital to invest.

Fixed interest rates

With PCP you’ll enjoy the comfort of fixed interest rates, making it easier to budget.

Warranty cover

Many PCP deals come with manufacturer warranties, giving you peace of mind when it comes to maintenance.

PCP vs. other auto finance options

Still not sure if PCP is your ideal route? Now we’ve got PCP finance explained, let’s compare it to other options to get a better understanding of the pros and cons:

Hire Purchase (HP)

HP agreements let you spread the cost of the car over a set term, but instead of options at the end of the agreement you own the car outright. It’s like paying off a mortgage and owning your home when the final instalment is made.

Personal Contract Hire (PCH)

PCH agreements involve leasing a vehicle throughout your duration of a contract. Unlike PCP and HP loans, PCH doesn’t involve borrowing money for car ownership. Instead, you initiate the leasing agreement with a non-refundable deposit and then make monthly ‘hire’ payments that give you use of the car. At the end of the contract, you’ll return the vehicle without the option to purchase it and become the outright owner. It’s important to note that PCH agreements often come with restrictions, including mileage limits and caps on acceptable wear and tear.

Personal loan

With a personal loan, you borrow a lump sum to purchase the car and own it from day one. Interest rates are usually significantly higher for personal loans.

Hit the road with PCP Finance

Ready to start your PCP finance journey? Remember, it’s important to fully understand the terms and conditions of your PCP agreement before you sign on the dotted line. It’s like checking the weather forecast before a long drive – being prepared is the key to a seamless trip.

Why choose My Car Credit for PCP finance?

At My Car Credit, we’re your trusted co-pilot when it comes to securing the best PCP finance deals. Why choose us for PCP finance?

Expertise: Our team has the knowledge and experience to guide you through the entire PCP process, from start to finish. If you need PCP finance explained, we have your back.

Variety: We work with a wide range of lenders to offer you the best PCP deals. Worried about having car finance declined? As well as high street banks, we partner with smaller lenders who can help you get finance, even if your credit score is less-than-perfect.

Choice: As well as partnering with a wide range of lenders, we offer a huge amount of choice when it comes to cars. No need to limit yourself to particular makes and models. We pride ourselves on helping every client secure the keys to their dream car, whatever that might be. It’s like having access to a huge showroom of cars, all in one place.

Flexibility: We tailor our PCP agreements to suit your specific needs, offering you a good amount of flexibility when it comes to things like deposit size, contract length and vehicle options.

Support: Need your Personal Contract Purchase explained? We’re here to answer your questions, provide guidance and make your PCP journey as smooth as possible.

Ready to get behind the wheel? Give us a call on 01246 458 810 to find out more about PCP finance options or email us at enquiries@mycarcredit.co.uk for a speedy response.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

Can You Modify a Car on HP Finance?

5 Different Ways to Pay for a Car

Is There a Maximum Age Limit for Car Finance?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

car buying car finance car loan credit score hire purchase PCP

Car Finance for First Time Buyers: A Beginner’s Guide

Buying your first car is an exciting milestone. It comes with a newfound sense of freedom and options to go wherever you want, whenever you want. What’s not to love? Of course, for most Brits, purchasing a new car outright isn’t realistic. Cue car finance for first time buyers.

Bankrolled by trusted lenders, car finance fills the gap between your initial cash down payment and the actual price of the vehicle. It’s hugely popular in the UK, with the latest statistics revealing 92% of new private cars are purchased using finance.

Want to know more? Read on for our complete guide, covering everything you need to know about car finance for first time buyers.

The benefits of car finance for first time buyers

First, let’s take a look at some of the key benefits of financing a car as a first time buyer:

Expand your options

Many first time buyers think they’re limited by a cash budget when shopping for a car. The truth is most new private cars in the UK are purchased using car finance. As mentioned earlier, this is a great way to boost your budget and unlock access to more desirable models.

Most Brits don’t have tens of thousands of pounds to spend on a new car. Instead, they partner with lenders to cover the cost of a car that would otherwise be out of their cash price range. We’re not saying car finance should be used to spend beyond your means. For example, buyers on entry-level salaries shouldn’t be eyeing luxury SUVs. Instead, car finance for first time buyers is simply a clever way to stretch out your payments over a pre-set timeframe.

Improve your credit score

Credit scores have to be earned, which can make things difficult for Brits without a solid borrowing history. If you have a limited financial paper trail, car finance for first time buyers can be a great way to improve your credit score and prove to lenders that you’re a responsible borrower. Moving forward, this will help you secure other loans like a house mortgage.

Stretch your insurance budget

New drivers are usually hit with sky high insurance rates. On average, motorists aged 25 or younger pay around £158 per month in premiums. If you’re wondering where you’re going to find an extra £1900 a year to cover your new driver insurance, car finance can be a great way to free up cash. You can’t spread out the cost of your annual insurance premium, but you do have options when it comes to the cost of car ownership.

Factors to consider for first time car finance

Can first time drivers get a car on finance? The answer is ‘yes’, but there are a couple of factors to consider first…

Age and eligibility

Can you get car finance at 18? Absolutely. At My Car Credit, we specialise in pairing young buyers with trusted lenders across the UK. 18 is the minimum age you can sign a contract, though we’re happy to get the ball rolling when you’re 17. On your 18^th birthday, we give your application the green light.

Credit score

We touched on how car finance for first time buyers can improve your credit score earlier. But what if you have a poor credit score? With the right support, it’s still possible to secure car finance. You may need to put down a slightly larger cash deposit and be willing to accept a higher annual percentage rate (APR) but in many cases, car finance is still possible with a poor credit score.

Types of car finance for first time buyers

When shopping for car finance, you’ll see a variety of different options. They can be a little hard to decipher at first, which is why we’ve put together a quick and easy guide covering your options.

Personal Contract Purchase (PCP)

PCP contracts are one of the most widely used car finance options in the UK. Benefits include low monthly repayments and lots of flexibility. You start with a cash deposit, then repay the rest of the loan in fixed monthly payments, plus interest. Instead of purchasing the car, your repayments cover the cost of depreciation.

Because of this, most PCP loans have mileage caps to limit depreciation and minimise wear and tear. When your contract ends, you can choose to return the car and start a new contract on a brand new vehicle, or you can make a final ‘balloon payment’ and own the car outright.

Hire Purchase (HP)

HP loans generally start with a 10% deposit, followed by monthly instalments, plus interest. Unlike PCP contracts, your fixed monthly payments are put towards the total value of the car, not depreciation. This means you don’t have mileage caps and you’re the legal owner of the car at the end of the contract. No balloon payment necessary. You can either sell the car and start a new HP loan or keep it with no ongoing payments.

Personal Contract Hire (PCH)

Unlike PCP and HP loans that give you the option to own the car at the end of your contract, PCH agreements adopt a lease model. Your repayments aren’t put towards depreciation or the total cost of the car. Instead, you’re simply renting a vehicle for the duration of your contract.

Purchase your dream car with auto finance

Now we’ve got the formalities out the way, it’s time to get stuck into the fun side of car finance – shopping for your dream set of wheels! Whether you see yourself behind the wheel of a zippy Mini or a spacious SEAT SUV, we’re here to help with tailored auto finance solutions. Give us a call on 01246 458 810 to find out more about car finance for first time buyers or email us at enquiries@mycarcredit.co.uk.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

How to Refinance a PCP Balloon Payment

How Much Does Car Finance Cost? Check Now!

Can You Modify a Car on HP Finance?

Loan amount

£

Repayment term

My credit rating

X monthly repayments of
^£X

Typical rate

Loan amount

Total payable

X% APR*

£X

*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!

or call 01246 458 810

auto finance car finance options credit score hire purchase interest Jan24 loans PCP

How to finance a used car

Financing a second-hand car – 4 options

Hire Purchase (HP)

Personal Contract Purchase (PCP)

Personal Contract Hire (PCH)

Personal Loan

Is financing a second-hand car right for me?

Find out more about financing a second-hand car

Rates from 9.9% APR. Representative APR 12.4%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

Buying a new car is exciting. Whether you’re looking for a family-friendly drive, or a two-seater sports car, finding a new set of wheels can be fun.

What is a balloon payment?

What happens if you can’t pay your balloon payment?

Late fees or penalties

Default and repossession

Legal action

Impact on credit score

Refinance your balloon payment

Negotiate with the lender

Hand back the vehicle

Sell or trade the vehicle in

Discuss balloon payment refinancing with My Car Credit

Rates from 9.9% APR. Representative APR 12.4%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

Car finance has lots of confusing jargon – and a balloon payment is one example. Consider this article your ultimate guide to the what, why and how of balloon payments.

What is a balloon payment?

How does a balloon payment work?

Why choose car finance with a balloon payment?

What happens if I can’t afford my balloon payment?

Apply with balloon payment finance with My Car Credit

Rates from 9.9% APR. Representative APR 12.4%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

One of the many benefits of car finance is its flexibility. The range of car finance agreements means you’re guaranteed to find one that works for your unique needs and circumstances.

What is a balloon payment?

How do balloon payments work?

What are the benefits of car finance with a balloon payment?

Lower monthly payments

You get to own your vehicle

What are the drawbacks of car finance with a balloon payment?

Usage restrictions

Payment shock

Not ideal for those with lower credit ratings

What happens if you can’t afford your balloon payment?

Is a balloon payment right for me?

Wondering if you are eligible for My Car Credit car finance?

Rates from 9.9% APR. Representative APR 12.4%

Related articles

Excellent

Good

Fair

Poor

Bad

Require more help?

How do you know if a car finance agreement with a balloon payment is right for you? The first step is to understand the advantages and disadvantages of a balloon payment. Read on as we look at 4 advantages and 4 potential disadvantages.

What is a balloon payment?

Advantages of a balloon payment

Lower monthly repayments

Fixed cost

Potential for positive equity

You get to own your vehicle!

Disadvantages of a balloon payment

Usage restrictions